Good morning! We are hearing that not only is the Iranian delegation still missing in Islamabad, but also that some explosions were heard overnight in Tehran. Israel continues its campaign in Lebanon, while the US delegation is supposedly already in Islamabad.
The situation remains tense as we look at prediction markets to figure out what is the most probable outcome.
Iran Tracker
#1 The Ceasefire
The chances for a permanent deal remain low. Traders see that main points of contestation are for now unresolvable.
Additionally, we see that the US airlift of troops and equipment continues unbothered, indicating that we are in a temporary break, rather than at the premise of a permanent deal.
JD Vance is still expected to talk to the Iranian delegation though. Even amid reports that it is missing. In our opinion, some talks should happen as there are factions in both the US and Iran that want peace. However, we believe that the market is slightly too certain about it.
#2 The Strait Of Hormuz
The Strait of Hormuz remains effectively closed, even though the ceasefire was conditional on it being open. For now traders see a chance for increased traffic, but even a partial normalization with 40+ boats crossing the strait remains elusive at 43%:
As the commodities crisis is dependent on the strait, rather than the war, energy prices remain elevated:
#3 Boots On The Ground
Invasion chances are flat since the ceasefire announcement, but are still elevated at 30%.
Same can be said about a Kharg Island invasion, which simply trades with a discount to general invasion:
#4 Regional Expansion
Outside of the UAE, of which chances remain slightly elevated due to rumors of them attacking Iran already, chances of a regional expansion lowered significantly.
At the same time, chances of a Bab-el-Mandeb Strait closure stabilized around 12%, indicating a rather low chance of that, even if war was to escalate again:
#5 Iran Regime Fall
Iran regime fall chances stabilized in the low 20s amid possible talks.
In our opinion they are still elevated vs our fair value perception as nothing indicates the foundation is wobbly at this time.
Wrap up
With nothing certain now, markets are volatile responding to any new report. We shall wait for what the weekend brings as historically it was a time of escalation.
We will continue to monitor the situation as the next hours and days will be crucial.
Make sure to follow prediction markets live to get fresh information on the conflict. Stay strong and see you tomorrow for another Morning Brief!
This is not official investment or life advice. Do your own research. This are only my opinions and I encourage anyone to do their own research before putting any money anywhere.